Every holiday season, I resort to doing the bulk of my shopping online because of the convenience and ease. And like any shopper, I always want to find the best price. I always find that I spend most of my time cross-referencing many online stores and checking the current auction prices on eBay. It’s a hassle that will hopefully soon meet its end.

Recently, I read about HammerTap’s acquisition of Auction Trust Network (ATN) [ article located at http://www.pr.com/press-release/31917 ]. HammerTap is a company that has always been trying to help both the buyer and seller in online auctions by creating software solutions for analyzing auction data. ATN is the producer of ReconnectTM, which is a software tool used by eBay customers. With this technology, HammerTap now looks to “revolutionize the online shopping experience” by supplying online customers “with helpful purchasing information, such as average selling price, for specific items in the eBay marketplace.”

I think this acquisition is very relevant to our course. For some items like baseball cards, price is determined by its auctioned values, but for many items, there is a discrepancy between an online merchant’s price and the average auctioned value. HammerTap is now going to make this discrepancy very public, which will increase competition and hopefully push merchants to minimize the discrepancy between the current auction price and their own price.

In class, we saw in the “Matching Markets with Intermediaries” example that two traders in perfect competition for one buyer and seller with have to set prices such that their profit is zero, because the traders would keep having to price-cut each other. In this example with HammerTap, we have one trader with a set price (the auction value), so that the other trader would not have to price-cut much below the auction value.

Also, by merging ATNs technology, HammerTap will also create a social network of representing trust between different merchants/consumers. As the article explains, each person using the software will have a buddy list and share the list with everyone that is on the list. This trust network adds additional pressure on online merchants to compete with online auctions and small time sellers. The “auction versus online” price discrepancy discussed above could be based on paying more for a reliable source. If that is the case, HammerTap will allow a buyer to indirectly gain trust in a merchant by seeing that someone the buyer trusts, trusts the merchant; therefore, unknown merchants with better prices can exponentially gain customers (when thought of like population growth) and online merchants need to have their prices reflect this competition.